Buy to let is a touchy subject for a few of you!
People who buy to let are either providing a valuable service to those that have to rent due to being unable to buy their own home, or people who are just greedy and their numerous properties stop many first time buyers from getting on the property ladder.
Whatever you thoughts about buy to let, it is clear that there is a sharp slowdown in the sector, as oversupply is denting demand and landlords quit the market.
A glut of properties and concerns over the global credit crunch has led to the decline in buy-to-let activity, the Royal Institution of Chartered Surveyors (RICS) says. They also say that the percentage of landlords selling their properties is at a three-year high.
It said new landlord instructions, an important indicator of the strength of the buy-to-let market, to a balance of plus 11%, down from 19% in the previous quarter. Some analysts fear a slowdown in the buy-to-let sector could exacerbate existing problems in the wider property market.
The buy-to-let market has grown sharply in recent years; in 1996, when buy-to-let mortgages were first launched, only 20,000 were taken out. According to the Council for Mortgage Lenders (CML), by September 2007 this figure had grown to 990,000 and the total amount borrowed to £116billion.
Clearly they have proved very popular with many people seeking to invest in property and make a tidy profit. But the recent problems in the wholesale financial markets have prompted a tougher approach from lenders.
As many of you are all too acutely aware of, the ongoing credit crunch has seen many lenders tighten their lending criteria and some have withdrawn buy-to-let products altogether. RICS said this might have caused new investors to avoid entering the buy-to-let market.
RICS housing spokesperson Jeremy Leaf commented on the current buy to let problems:
"A combination of tightening lending criteria and successive interest rate rises has started to hit the buy-to-let market. With the drop in capital gains tax due in April next year, many landlords will resist selling until the spring". "With rents still on the increase, many would-be-buyers will find accessing the housing market even more difficult as they struggle to raise the capital for that first important purchase. However, many landlords will still take solace from uncertainty in the economy and enjoy the gains from rising rents,".
The RICS survey shows a growing number of landlords dropping out of the market, as the effect of interest rate hikes seeps through;
6.5% of landlords said they were selling their properties when their tenant leases expire, up from 6.1% and
the highest level since January 2005.
In November, RICS said property investors were being asked to produce a 30% deposit, costing an average of £65,600. In 2002, an 8% deposit was common, at an average of £10,100.
Many lenders now also require that the rent on any prospective buy-to-let property equates to more than 125% of the monthly mortgage payment, which can be hard to achieve in some areas.
RICS concluded that buy-to-let had become a "rich man's game", with all but the wealthiest priced out of the market.
So, has buy to let become an exclusive club for all but the wealthiest to play the property game in?
While the housing market problems may cause hassle for people with buy to let, is it a good thing?
After all, while they may not make as much money as they wish, does it also leave less landlords for those who have to rent?
Why not let us know what you think in the comments?
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